Effective creditor communication key to helping consumers in financial difficulty

The Mixed Messages report outlines the extent to which communications from creditors help people take action to resolve their debts, finding that while communications can sometimes be effective, many said they faced barriers to getting the help they needed. Only a minority felt the communications they received had helped them understand their options. 

The initial barriers to getting help included 56% of people feeling shame and embarrassment, 35% who lacked awareness about the seriousness of their financial situation, and 34% who lacked information about how debt advice could help them. 

This was compounded by communications from lenders, with nine in 10 respondents saying they triggered negative emotions including fear, helplessness and being overwhelmed. Additionally, the common use of legal and regulatory language was regularly found to inhibit understanding and reinforce negative emotions. 

As a result, just 38% of respondents felt the communications they received helped them understand their options, with only 27.5% of people feeling these communications reassured them that their creditors would help them solve their problems. 

Overall, 69% of those surveyed felt they could have been signposted to debt advice, with 53% waiting more than a year before seeking debt advice. 

These findings echo those published by the Financial Conduct Authority in June this year, which highlighted the need for firms to be swift to respond to consumers in financial difficulty - particularly in light of the ongoing cost-of-living crisis. 

Off the back of its research, StepChange and Amplified Global have put forward recommendations to the government, industry and regulators designed to address some of the issues raised. 

This includes calling on creditors to simplify communications and give people a clear plan of action by developing measures to evaluate the readability and effectiveness of communications for people in financial difficulty. It’s also asked for firms to simplify and improve the tone and presentation of the text so people feel confident creditors can and will help.

Additionally, it asked for a better and quicker identification process for those in financial difficulty, and to reduce the barriers to help by reviewing the early identification rules and firms’ implementation of them. 

As well as this, it asked for a review of the Consumer Credit Act requirements on creditor communications to ensure content prescribed by legislation and rules does not overwhelm people and lead them to disengage. 

StepChange’s head of policy Peter Tutton said: “These findings are designed to help the advice sector and creditor organisations decide how best we can work together and with regulators on practical steps that would deliver earlier and better identification of financial difficulty and vulnerability, improve the effectiveness of communications and ultimately improve outcomes for customers.

“By developing messaging that focuses on helping people to resolve their situation, empathetic communications that recognise the emotional impact of financial difficulty, and the presentation of a simple, clear plan of action, creditors can ensure better outcomes for more consumers. 

“We hope the experiences outlined in this report will inform further steps by government, industry and regulators to improve the effectiveness of creditor-consumer dialogue and get people to the help they need earlier and with less anxiety.”